Choosing the Best Accounting Software for Your Business
Accounting software is undeniably important in the business world. This has created a significant demand and supply conundrum in the market. The number of accounting software available makes it difficult for businesses to choose one. Considering how important the software is for your company, you should be careful while selecting one. There are a number of factors that you should check to ensure you get the best accounting software. This article will explain everything you need to know to choose the correct accounting system software for your business.
Before we move to accounting software, let’s get some basics out of the way.
What is Accounting?
Accounting is the procedure of recording financial transactions about a business. It includes the measuring, analyzing, and reporting of these transactions to different organizations. The transactions are summarized in the form of short financial statements to present to other stakeholders. Accounting is also called the language of business.
Types of Accounting
There are multiple types of accounting. These are financial accounting, management accounting, tax accounting, auditing, etc.
Financial accounting focuses on reporting financial data of an entity to outside parties. They can be investors, creditors, potential investors, etc. The accountant of a company prepares its financial statements on the best accounting software in accordance with Generally Accepted Accounting Principles (GAAP). In general, financial accounting produces reports based on past data. For instance, in 2012, an accountant will prepare its financial statements based on 2011 data. It will be either on an annual or quarterly basis.
Management accounting focuses on measuring, analyzing, and reporting financial data to internal stakeholders. Mainly, managers use this data. It provides managers with useful data so that they can decide on the future of the company. Note that management accounting is not done in accordance with GAAP. Accountants are free to do it the way they want on the best accounting software. By the way, it is based on cost-benefit analysis. Different from financial accounting, management accounting is also future-oriented. For example, the budget for 2008 was prepared in 2007.
Importance of Accounting
Accounting is one of the essential parts of all businesses. First, it helps businesses monitor their income and loss. In other words, it allows companies to see how they have performed. By accessing this data, businesses are able to show it to external parties. As a result, they get the chance to acquire investments, getting credits, etc. Also, companies become well aware of their expenses and profits, and can plan their budget accordingly.
Additionally, it is crucial in statutory compliance. The laws and regulations differ from country to country. But accountants ensure through best accounting software that companies are compliant with such specific regulations. By this, they are able to pay their liabilities, taxes, and other necessities that arise as a result of business processes.
Besides, accounting is useful in creating future projections and budgets. Note that business projections and trends are based on past data. So, companies understand how to allocate their budget to make their operations profitable.
Lastly, companies have to file their financial statements. Accounting comes to help in this case, too. It assists business when in the cases of stock exchanges, indirect and direct tax filings.
Common Mistakes in Accounting
Just like in other fields, there are common mistakes that are made in accounting. One of them is failing to chase accounting procedures. Though, it may be tiring in some cases; it is really helpful for businesses. To avoid this, you can generate standardized forms and checklists. By this, you will be able to ensure accuracy and consistency.
Further, one of the mistakes that many businesses make is regarding budgeting. Budgeting is crucial in several aspects. First, when you know your budget, you do not make any overspending. Also, you set your financial objectives realistically. In such a case, you know what will/can be your expenses and profits. So, ensure you work with a budget.
Additionally, many firms fail to backup their accounting software. It does not matter whether you use the best accounting software. If you do not use it properly, all your accounting, and consequently, business operations will be affected negatively. It is even advisable to double-check your backup files to ensure everything is in place.
Another widespread mistake made by many businesses is failing to classify revenue and expenses. Note that a lot of money will come in and go out of your company. You need to categorize them properly so that you can produce a proper financial statement. Businesses that pay tremendous attention to their accounting never make mistakes. They are aware of every transaction and the source of it. It allows businesses to become successful in their operations, as well.
Accounting Software - What is It?
Accounting software records and processes transactions. It implements these transactions within functional modules such as trial balance, accounts receivable, etc. In general, small business accounting software operates as an accounting information system. As a business owner, you can buy it from a third party, or develop it. You can also get the best accounting software by purchasing it from a third party and modifying it according to your needs, too. Note that you can access it anytime, anywhere, through any device connecting to the internet. It is worth mentioning that this software can be desktop based and online-based.
Types of Accounting Software
There are basically four types of accounting software. These are spreadsheets, commercial accounting software, enterprise accounting software, and custom accounting software.
Small businesses usually utilize spreadsheet programs such as Google Sheets or Excel to assist with bookkeeping. It is possible to adjust a spreadsheet to almost any primitive accounting need. For instance, you can use spreadsheet programs to classify revenues, expenses, or any other financial data. In general, spreadsheets can be considered the best accounting software for small businesses. But for bigger firms, spreadsheets typically compliment other accounting procedures.
Commercial Accounting Software
Commercial accounting software can deal with most small and middle scale businesses’ accounting needs. This type of accounting software can operate in any business and lets you generate customized functions to meet your specific requirements. Note that commercial accounting software usually contains graphs to display data and reports to show a depiction of a business’ condition. All types of commercial accounting software have strong and weak aspects.
Enterprise Accounting Software
Huge organizations usually possess significantly complex operations. Enterprise accounting software comes to their help to handle this complexity. This software typically integrates other services supplied within it with accounting. Examples for such services can be project planning, business intelligence, etc.
In most cases, when a large firm chooses enterprise accounting software, before the agreement, they go through several stages. These stages are often product demonstration, communication with other enterprises that utilize the software, and more. It is done to ensure that the company gets the best accounting software. Also, this type of accounting software does not use two-dimensional spreadsheets. Instead, it is based on relational databases that indicate the relationship between various groups of information. Common enterprise accounting software is SAP, Oracle, and so on.
Custom Accounting Software
In some cases, a company builds its accounting software. It is called custom accounting software. This type of software is created in two situations. The first one is by accident. Skillful staff may be requested to build software to manage different accounting situations as the business grows. After a point, they see that they have created their own software. In the second situation, a company notices that even the best accounting software does not meet its needs. So, they create their own custom accounting software.
Why Should You Use Accounting Software?
So why should you use accounting software at all? Well, simply because it shows you where you should cut expenses and drive productivity. If you have a proper system, you will be able to automate bookkeeping tasks and prepare tax-friendly reports. But before everything, through the account system software, you can predict the expenses and create a smarter investment plan.
Benefits of Accounting Software
Accounting software simplifies the processing and reporting of your financial data. It presents complex data to non-accounting audiences in a way that they easily understand. Also, with very little or even no training, you can implement all accounting operations of your business by yourself in compliance with legal standards. Note that you can do it yourself through any device. In this case, you would not need any external party that you would pay to.
The best accounting software will automate your core calculations and administrative processes. Thanks to this, you will not have to outsource this work to any external party. At the same time, it will diminish expenses regarding printing and distributing documentation and will keep sensitive data in safe locations.
Accountants consider financial transparency as the primary benefit of accounting software. The nightmare in terms of accounting is a costly human error for any business. Producing wrong numbers or reporting data late can lead companies to a crisis. That is where automatic computations are beneficial.
Precise forecasting is one of the significant advantages of accounting software. Without a proper system, you will barely understand what is going on with your financial data. Yet top accounting software makes numbers meaningful. So, you can see where you should cut costs and where you should invest more. Additionally, you will see a greater picture of your business’s finance and will be able to make smarter decisions going forward.
If you want to improve the performance of your company, your first choice should be accounting software. It will assist you in collecting, organizing, and analyzing the most sensitive data. Most importantly, it will help you make decisions in a smarter way in your business.
Compliance with Tax
Most of the best accounting software adhere to the tax regulations automatically. So, as soon as you get them, they turn to be your central audit and tax information source. To keep a transparent workflow, they store all the necessary information for you.
Increased Customer Satisfaction
You may wonder how accounting software is relevant to customer satisfaction. Well, users know that they are. Most accounting software has improved billing and invoicing features. They also prevent any type of delays regarding communication with clients. It is also possible to personalize them. So, accounting software helps businesses to seem more professional and trustworthy.
Finally, the last huge benefit of accounting software is security. Undoubtedly, financial data is the most critical data belonging to a company. You never want it to get into the wrong hands or get lost. That is what the best accounting software ensures. They keep your financial data away from unreliable sources and make a copy of it if you want to retrieve it. On most occasions, you will create your internal security and decide who can access it.
Main Features of Accounting Software
Accounting is a fundamental feature that comes to mind when talking about accounting software. That is what you have to take into account, too, while choosing software. General ledger, accounts receivable, accounts receivable are the primary and crucial aspects in terms of accounting. Of course, some of the best accounting software offers even more complicated accounting features for users.
Budgeting and Forecasting
That is another common feature in the majority of accounting software. It helps companies understand their performance for the last year and prepare a budget for the forthcoming one. Thanks to this component, businesses can set realistic sales targets to achieve.
Fixed Asset Management
Fixed asset management helps you handle financial data more precisely. No matter if it is separate or inside the tool. You should have it. That is why it is included in most accounting software. It unites features such as depreciation assets, cost records, audit history, etc.
Billing and Invoicing
There is some accounting software that is specifically created for billing and invoicing. Still, most of them include this feature as a primary characteristic. They allow clients to adjust operations to effective and modern payment ways. Also, they enable the business to prepare accurate, timely invoices for their customers.
Thanks to this feature, you will be able to easily calculate employee payments and create their check without any delay. It will also be possible to answer all legal and tax commitments without any mistake. It is true that there is a specific software for payroll management. Yet, most accounting software will have this feature to assist you with payroll related matters.
This feature is exclusive to government agencies and non-profit organizations. It is used to monitor grant management, donation expenses, etc.
Project accounting software is typically produced as a separate system. Mainly, software developers and construction operators use it. Through this software, it is possible to manage various projects. The primary capability of project accounting software is calculating and managing the overhead costs relevant to the material, labor, equipment, etc. Needless to say, other fundamental accounting features are available in it, too.
The last important feature that is found in most accounting software is inventory management. It will enable you to control the availability and movement of your stock. Also, you will be able to avoid any type of overstocking or understocking with its help.
How to Choose Your Accounting Software
Integrated Invoicing Module
No matter what your significant operations are, your accounting software should be complete. And you should have a basic billing and invoicing tool inbuilt. It will free you from paying for extra software and moving data to other software.
Easy to Use
Accounting procedures are not easy at all. There are a lot of calculations, reports, etc. That is why you should ensure that the accounting software you get is as easy to use as possible. So, the information should be available in a neat way. The functions must be available on a single dashboard, so you can use them whenever needed. The best accounting software will ensure you do not struggle using it.
No accounting software will suit all companies. It should not be surprising as the operations and calculations of all businesses differ. So, you should ensure you get a system that will fit your procedures. If you do not find such a system, ensure you get something flexible. As a result, you will be able to customize it according to your needs.
Security is an aspect you cannot tolerate. The accounting software will deal with the most sensitive data of your company. Therefore, you should ensure that the security system is bulletproof. Usually, the top accounting software will provide you with the highest security. Still, it is advisable to check it when you purchase it.
It is one of the most critical components when choosing an accounting software system. Obviously, a tool featuring more characteristics will cost more. But keep in mind that there are even free technologies that include many features that businesses demand. In short, make sure you research the prices of various software enough before deciding.
When you get accounting software, you will already have a bunch of systems that you will have to integrate it to. You cannot just alter your entire software infrastructure because of a single system. That is why ensure to get accounting software that integrates with the instruments you have. At least, it should provide you an API to connect with any system you want.
Previously, only large-enterprises used to get the software with mobile usage. So, it was considered a luxury one. But as time passed, it turned out to be an ordinary feature that most software included. So, why not have it? Many software providers offer IOS and Android apps for their users. Also, they are inferior to no desktop in terms of operability. Keep that in mind.
The last point you should check out when getting an accounting software system is reliable support. Know that many suppliers market themselves emphasizing their ideal support. In reality, few provide the support they advertise. So, before getting a system, make sure you check their support.
Cost of Accounting Software
The cost of accounting software is a variable that depends on multiple factors. For instance, accounting software providers charge their clients based on the number of users, the type of support required, available features, etc. In general, there is a lot of free accounting software. They will provide you with basic account features. Such software is useful for small businesses. Also, the upper limit of paid versions of accounting software is somewhere around $30,000. In general, there can be a one-time payment, monthly, or annual payment.
For you to have a better idea, get familiar with Xerox pricing plans. Note that Xerox is one of the prominent accounting software providers in the industry. It has three monthly subscription plans. They charge clients $9 per month for the Early plan. It allows users to send up to five invoices and implement 20 bank transactions. The Growing plan costs $30. You can send unlimited numbers of invoices and have bank transactions. Finally, there is the Established plan that is priced at $60 monthly. This plan enables you to have transactions in multiple currencies. Also, it is possible to track projects and manage your costs through it.
After reading this, you should have a good understanding of accounting software. As you can see, it assists businesses of different sizes in many aspects. Although there are many benefits and features of the best accounting software, you would be better off to get one that fits your needs. By doing this, you will also save a lot of costs. If you found the article useful, make sure to share it with your friends so that they also benefit.